Why is Ed-Tech going down?
Edtech start-ups, which recorded frantic 300 percent to 400 percent customer growth during the pandemic, are now struggling under the double whammy of pandemic tailwinds wearing off and a global funding slowdown. When the lockdown was imposed due to the COVID-19 pandemic and schools being shut down, the ed-tech startups witnessed their best times during 2020 and 2021. From $2.2 billion in 2020, Indian ed-tech companies raised $4.7 billion in 2021. This makes the ed-tech sector the third most financially supported segment of Indian start-ups, just behind e-commerce ($10.7 billion) and fintech ($8 billion).
The business plans of India’s ed-tech entrepreneurs have begun to fall apart as the pandemic has subsided. The demand for online tuition has decreased as schools around the nation have begun to reopen, which has recently had an impact on ed-tech companies’ earnings. The pandemic benefited this industry as a large portion of the $180 billion domestic schooling market moved online. Over the past two years, businesses have profited from growth in the online education sector as a result of their large-scale bets on pandemic-related events. While waning investor confidence and sluggish funding rounds have hurt startups generally, ed-tech businesses have been particularly hard striking.
Edtech going offline
Major companies have entered the offline or hybrid learning markets, like Byju’s and Unacademy. Even firms that specialize in upskilling, such as Imarticus Learning, Stoa School, and Scaler, have incorporated offline features into their course designs. Scaler has teamed with co-living firms to provide its students with a personalized living environment (Scalerverse), although classes still take place online. Although the Stoa School has been experimenting with three-day residencies and city-wide gatherings, its primary method of instruction is still online.
Unicorns with ample funding, such as Byju’s and Unacademy, are able to bear the rising CACs and increased real estate expenses associated with operating offline centres. However, these variables can make it difficult for firms to endure in the case of smaller beginnings. This is what happened with an early-stage business called Udayy, which earlier this year closed its doors after terminating 100 employees.
By now, it should be clear that there is a worldwide economic slowdown, with startups suffering the most. According to Crunchbase data, global venture capital decreased by USD 10 billion months over month in February 2022, totaling USD 52 billion. According to research by IVCA and EY, USD 5.5 billion in PE/VC investments were made in April 2022, which is 27% less than April 2021 and 11% more than March 2022.
The number of paid enrollments that the ed-tech businesses obtain through their army of salesmen — rather than the outcomes or real learning outcomes — is the yardstick they use to demonstrate their growth. They had no interest in investing the time and resources necessary to monitor learning results through a randomized control experiment.
Without considering whether a particular student actually needs their products, ed-tech companies sell them. Their “one size fits all” sales approach is currently failing. Online courses from ed-tech companies were said to be more individualized and self-paced. Offline lessons, where you engage with other students and the teacher recognizes you by name, appear to be more personalized.
Perhaps the majority of school-going students find self-paced learning ineffective, and it would be preferable to have an experienced person create your schedule instead.
By 2030, India’s education market is projected to increase to $313 billion. The market size of ed-tech industry is about $2 billion. The opportunity is vast given India has the largest population in the world in the age bracket of 5–24 year with 580 million people. India has over 250 million school-going students, more than any other country.
So, it is clear that big ed-tech firms with deep pockets are funding their hybrid move to stay in business. Some of them had made the right moves even before the pandemic started ebbing. Like other sectors where competition is stiff, the future belongs to those who can innovate while focussing on sustainability.
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